Medium-sized firms face higher loan costs in Q4 – CBN

From Adanna Nnamani, Abuja

Medium-sized private non-financial corporations (PNFCs) faced higher borrowing costs in the fourth quarter of 2025, even as banks expanded credit supply and demand for loans increased across the economy, according to the Central Bank of Nigeria’s (CBN) Credit Conditions Survey.

The Q4 2025 report showed that while lending conditions generally improved for households and businesses, loan spreads for medium-sized firms widened by –4.8 index points relative to the Monetary Policy Rate (MPR), signalling increased cost of borrowing for the segment.

In contrast, the survey revealed that loan spreads narrowed for small businesses (14.8 index points), large private non-financial corporations (2.9 index points) and other financial corporations (4.3 index points), indicating relatively better pricing conditions for those borrowers.

“Lenders reported increased credit availability for secured, unsecured, and corporate lending in Q4 2025,” the survey stated, attributing the expansion to changing economic outlook and market share objectives.

Despite higher borrowing costs for medium-sized firms, demand for corporate credit rose during the quarter, driven largely by inventory financing (26.2 index points) and capital investment (20.8 index points), as businesses sought funds to sustain operations and expand capacity.

The report also showed that banks increased loan approvals for secured and corporate lending, although approvals for unsecured loans declined, reflecting heightened risk concerns among lenders.

However, the easing of credit conditions came with rising risks. Lenders reported higher default rates across secured, unsecured and all corporate lending categories, suggesting that many borrowers are struggling to meet repayment obligations amid persistent inflationary pressures and high operating costs.

For households, the survey indicated that borrowing costs remained elevated, with spreads on secured and unsecured loans widening by –10.8 and –2.0 index points, respectively, relative to the MPR.

The Credit Conditions Survey, conducted in November 2025, captures the views of participating financial institutions. The apex bank noted that the findings reflect lenders’ experiences in the credit market during the review period.

Analysts say the higher loan costs faced by medium-sized firms could constrain expansion plans and job creation, even as overall credit flows improve across the economy.